Merry Christmas

Wishing you a very Merry Christmas and a wonderful New Year from the team at Walsh & Associates

...Vaughan, Kevin, Tessa, Graeme, Dave, Hayden & Karin

 

Our offices close on Friday 20 December 2013 and re-open Monday 13 January 2014

Provisional Tax – do you have a payment due?

As we look forward to the Christmas break, please don’t forget that on 15 January 2014 you may be required to make a provisional tax payment to the IRD if your balance date is 31 March. This is the second provisional tax instalment due for the income tax year ended 31 March 2014.

So who has to make a payment? Prima facie a taxpayer who had residual income tax of $2,500 or more in the prior income tax year (31 March 2013) will be required to make a payment to IRD. However, we all know prior trading history does not always reflect the current income year. There will be taxpayers out there who are not obligated to make a payment, yet are trading well and should consider making a payment to avoid penalties and use of money interest. There will also be taxpayers who are trading well down from last year, and should consider holding off on making a provisional tax payment.

Provisional tax is a complicated beast; if you are uncertain about your obligations please contact Walsh & Associates for further advice.

We’ve got you covered….. from the Cloud to the waves…

Walsh & Associates are immensely proud to be sponsoring Marguerite de Savoye Vujcich, better known as the “Surfing Lawyer”.

Check out Marguerite’s website http://www.thesurfinglawyer.co.nz/

 

Like business, we love to work with winners, so all the best Marguerite.  Watch this space closely to see how Marguerite and her surfboard ‘Senior’, wipe the opposition out.

“May the waves be with you Marguerite”

Minimise your Fringe Benefit Tax on Motor Vehicles

Fringe Benefit tax is triggered where there is an employee-employer relationship and an employer’s motor vehicle is either used for private use or is available for private use by an employee.

Here are some ways you can reduce your fringe benefit tax liability:

Consider buying a work related vehicle

A motor vehicle must meet certain criteria to qualify as a work related vehicle. Every day that the motor vehicle meets the criteria it will be an exempt day from fringe benefit tax.

Essentially a work related vehicle must be principally used (i.e more than 50%) for carrying goods as opposed to passengers. These can include a courier’s motor cycle, vans, minibuses, light trucks, utes and taxis. The rear seats must be permanently removed or bolted down and the employers name or logo must be prominently permanently displayed on the outside of the vehicle.

Reducing the number of days the motor vehicle is available for private use

The day an employee departs from home on an emergency call out is an exempt day. Generally an emergency call out has to be essential to the operations of the business and occur between 6pm and 6am during the working week or at any time on a Saturday, Sunday or statutory holiday.

Where an employee uses a motor vehicle away from home on work related business for a period of 24 hours continuously can be classed as an exempt day. Some conditions apply including that the travel must be in the course of employment and the nature of the employment requires the employee to be regularly away from home. If the motor vehicle is parked up at an airport and not available for private use for a period of 24 hours continuously then those days are also classed as exempt.

If the employee is not permitted to use the motor vehicle whilst on annual leave, sick leave, statutory holidays or weekends these days can also be exempt for fringe benefit tax. In this situation we would recommend that the employer write a letter to the employee confirming the arrangement and regularly check its being complied with.

Employee contributions

Any expenses the employee contributes towards the purchase or the running of the vehicle can be deducted from the fringe benefit value that calculates fringe benefit tax.

With shareholder employees the full value of the fringe benefit can be eliminated will the amount charged to their shareholder current account in the financial statements. This means there is a Nil fringe benefit liability in the fringe benefit tax return and an adjustment is made through income in the financial statement for the equivalent amount.

If you’re serious about minimising your fringe benefit tax speak to us now!

Shareholder Agreements

We recently presented a course on succession planning and one question to come out of it was “Do I need a shareholders agreement and what is it?”

In its simplest form, a shareholders agreement is a private arrangement among the shareholders of a Company. A Company Constitution is a public document that is registered with the Registrar of Companies.

The shareholders agreement is often viewed as a document in the negotiation phase of forming a Company, and as such it can isolate any differences that may occur downstream.

Take this example of a florist business that didn’t have a shareholders’ agreement.  There were 3 shareholders; one died (no pre-emptive rights). He left his shares to his daughter who didn’t want to be there, the other two shareholders couldn’t afford to buy her out, so she sold her shares to an opposition company. The opposition made things tougher, one of the other shareholders walked away, and the remainder of the original three was forced to borrow money to buy out the balance of the other two shareholdings, just to keep the doors open.

A shareholders agreement would have helped because:
- pre-emptive rights
- dispute resolution procedure
- insurance
- approval thresholds for major decisions.

So if you go into business and you do nothing else, always have a shareholders agreement, because they are worth their weight in gold.

  

Chasing Debt

Do you feel like you are sometimes at the bottom of your customers list to be paid?

Consider offering a discount (say 5%) for payments made within 7 days of you sending an invoice.

You may think “but I’d be losing 5% of my income”.

But consider this: Are you paying overdraft interest when your cash-flow isn’t moving positively?

Are you being charged late payment charges by your suppliers when you exceed their credit terms?

If your answer is yes to either (or both) of these questions, then it is likely that accepting 95% payment from your customers for paying within 7 days will give you a more positive position than waiting for 30, 60 or sometimes 90 days and incurring extra costs yourself.

Student Loan Updates

 A few updates from the world of student loans to start off your short week…

If you have a student loan and you work for salary or wages with PAYE deducted, you need to use a tax code with the “SL” repayment code (unless you have a special tax code or a repayment deduction exemption).

HOWEVER, if you receive income without tax deducted at source, you need to ensure you are making repayments on your student loan at the correct dates each year.

Are you an overseas-based borrower?

If you're an overseas-based borrower your repayment obligation is based on your total loan balance at 31 March, plus the annual administration fee. Your repayments are due in two equal instalments.

The due dates for each repayment are generally 30 September and 31 March each year.

Need help keeping up with your student loan obligations? Come and have a chat with us at Walsh & Associates.

Do you have an investment property?

·        Are you claiming all the legitimate tax deductions against your rental income?

·        Are you properties in the best structure to minimise income tax?

·        Could you have “Associated Parties” issues when it comes to selling?

·        Are you looking to build your investment property portfolio?

·        Do you need assistance with accounting for the transactions and keeping your records up-to date?

·        What’s an LTC?

·        Confused?

Who are we?

We are a Chartered Accounting firm of 7 staff with offices in Napier and Waipukurau. As a Chartered Accountant our rules and ethics are policed heavily by the NZ Institute of Chartered Accountants.

We work with small to medium businesses across a wide range of industries and pride ourselves on providing a first class personal service with a smile.

We have the experience and we are property investors ourselves so we understand your business and the current issues you face.

How can you contact us?

Come and have a no obligation chat with our Rental Property accounting and taxation specialists

Call Graeme on (06) 833-6295 or visit our website www.walshassociates.co.nz

Hawke's Bay Property Investors' Evening with Duncan Watson

Provisional Tax - Have Your Money Work For You

I met up with a close friend last night who is a part owner in a family business. The conversation turned to tax as it often does, as no one likes paying more than they have to. As it turned out he wasn’t happy following having his 2013 financial statements and tax returns recently completed.  His company had been lumped with a $2k Inland Revenue Department use of money interest bill for short paying his provisional tax following a short unexpected period of growth in his business. How could this have been avoided?

Here at Walsh Associates we have our finger on the pulse when it comes to tracking our client’s profits. Leading up to each provisional tax due date, we talk to our clients to find out how they’re their business is tracking and can review profit estimates based on their up-to date information. From this we can recommend additional payments be made to avoid the above scenario if the business has had a period of substantial growth in profit, or if the performance of the business has been scaled back, payments can often be reduced to save clients money. 

If there are changes to your business it’s important that you speak with your accountant. If they fail to appreciate the seriousness of the situation, then please contact Walsh and Associates,  as tax mitigation is a significant part of our business.

Successful Evening for Succession Planning...

We'd just like to say a big thank you to all those who attended our Walsh & Associates and Life NZ Succession Planning Evening last night.

It was a great turn out and we hope to see you all again soon!

“Succession Planning for Success”

Are you and your business prepared?

---

Walsh and Associates and Life NZ Ltd have been advising and supporting SME’s for many years with management and financial accounting, business & leadership development, business acquisition and business sales. We are very excited to invite you to a COMPLIMENTARY informative evening on Succession Planning with drinks and nibbles starting at 5.30pm on Wednesday 2^nd October at the Blue Water Hotel.

If you are planning to retire, sell, or exit your business within the next 10 years then this presentation is for YOU!

The Evening will start at 5.30pm with drinks and nibbles and the presentation starting at 6pm covering:

·        What is succession planning?

·        What are the current market trends?

·        What are the current options?

·        How to prepare a business for sale?

·        Real live HB examples of Succession with various outcomes.

So if you are keen to:

• Get the best possible return on your investment?
• Get your business to progress to another level so you can take a step back?
• Create an ongoing successful business legacy?                                                 
• Gain further business and financial insight?

If this sounds like you, we would love to see you at the Blue Water Hotel on Wednesday 2^nd October at 5.30pm.  Please RSVP reception@walshassociates.co.nz or robert@lifenz.co.nz or phone Karin 833 6295 or Robert 0274 794 064 by Monday 30^th September for catering purposes.

Overseas Income

Do you have overseas income (some examples are interest, shares or a superannuation scheme held in a country other than New Zealand)?  If so, these investments may be taxed under New Zealand tax legislation.  The rules around taxing overseas investments can be complicated. For further information, please contact us.

Improve Debt Collection

Vaughan gave a small business presentation to small businesses last Thursday.  He’s attached the following as a means to improve debtor collections:

1. Develop regular processes:
1. Accurate cash flow depends upon having the right information.
2. Develop some worthwhile housekeeping rules for your company.
3. Ensure that you as the owner, make sure that all your staff are productive.
4. Keep a weekly eye on productivity ratios and set budgets, so at a glance you can see whether people are keeping to their budgeted ratios.
5. When a job is complete, invoice it there and then, don’t hang around till month end and say I’ll do it then.
6. Offer a prompt payment discount – say 5% if paid within 5 days.
   
   
2. An apple a day:
1. The best way to manage cash flow is to spend some time on it each day.
2. As a small business owner, each morning I open Xero and see who has paid me.
3. I then compare the payments received, against the expected cash flow we had budgeted for on the previous Friday.
4. Use Microsoft Outlook or some other electronic diary that warns you when you have a payment coming up.
   
   
3. Look at your creditors:
1. Many companies are so focused on inwards cash, that they forget all about their creditors.
2. We know that managing debtors is vital, but managing creditors is just as vital.
   
   
4. Talk to your suppliers:
1. You can take discounts, avoid late payment penalties, and negotiate for better terms with creditors whom you spend a lot of money with.
   
   
5. On-line accounting tools:
1. Excellent way of managing your investment.
2. We add all our clients to Xero now because it gives them so much more flexibility.
3. It allows you as the business owner, to develop tools such as real time forecasting.
4. You can be on the move and once you have access to your Smart Phone or a PC, you can look at your sales versus cash actually coming into the bank.

 The slide of the day was “Have short payment terms and enforce them. We use 7 days. We are serious about the work that we perform, so we can be serious about collecting payment.”  Jochen Daum

BUDGET 2013/2014

Wow what a tight budget, no real surprises, but good to see some savings in ACC levies. Some concerns in the housing markets, with most of the measures brought in to stop the housing market bubble which will affect Auckland, but not offer much help for the regions. The IRD continues to gain favor with Government by getting a further $6.65 million to target property investment. If you have a property investment entity, think carefully about our Audit Insurance, because that’s the target of their focus.


Fairfax NZ produced the following Tax-o-Meter Interactive Table, which shown for a given level of income, this is how your daily tax is spent:
                                                                                         Income Level
                                                              
                                                        

Tax Breakdown	42,600.00	61,400.00	90,600.00
Social Security
Superannuation	2.34	4.13	7.51
Unemployment	0.19	0.33	0.61
Other	2.75	4.85	8.83
Law & Order	0.84	1.48	2.69
Health	3.26	5.75	10.47
Defence	0.54	0.95	1.72
Education	2.85	5.03	9.16
Transport & Communication	0.47	0.83	1.52
Heritage, Culture & Recreation	0.19	0.33	0.60
Other	4.33	7.66	13.94
Value Per Day	17.76	31.34	57.05

A good way to wind up a busy week, no major tax changes that we need to seriously plan for.

Assumptions Can Cost Money

Debt assumptions no-one should accept:

1.The minimum repayment levels on credit cards are sensible.

2.Rises in your credit card limits offered by the bank are a reward to a good customer.
3. Paying back a mortgage over 35 years is okay.
4. Interest rates advertised in the bank windows are the rates everybody pays.
5. You deserve a holiday, and paying for it with a personal loan is okay.

The truth, again in rapid order:

1. The longer you pay, the more you pay. Pay off that $2000 at $40 a month (minimum repayment 2 per cent), and you'll be going grey by the time the debt's gone.
2. The only person who should be seeking to lift your limit, is you.
3. Debt is risk. The longer you carry it, the more you pay for the privilege.
4. The clever and the bold never pay the advertised mortgage rate. If the bank wants to keep your business, make them show it.
5. You can't help buying a house on credit. It can hard to buy a car without debt. It's downright daft to holiday on debt.

GOLDEN RULES

Assume nothing, question everything.
Take out debt only for the important stuff.
There's no shame in bargaining hard.

Rob Stock is a journalist with the Fairfax Business Bureau and money editor of Sunday Star-Times. Contact him at rob.stock@fairfaxmedia.co.nz

2012 Terminal Tax

Just to remind you 2012 Terminal Tax is due 7 April 2013

First Prize for Walsh & Associates Student

Our tag line at Walsh & Associates has always been 'Plain Talk Smart Thinking', and we have continued with this vein of thought in our approach to the staff we employ.

I am pleased to advise that our student Hayden has gained first prize in Accounting at EIT. He has also won two scholarships from EIT and the New Zealand Institute of Chartered Accountants for first year accounting. Well done Hayden, you have set the standard of experience for what we expect each year for the next two years.

If you want to have a chat with Hayden, ring him at our office and find out his views on Accounting and how he may be able to help you.

Xerocon 2013

We had a team of 5 attend the Xero conference on Friday 22 February 2013 and I would like to share some of the interesting statistics that came out of that conference.

The infrastructure around Xero is huge. It is no longer seen as a couple of people having an idea and then selling it to the market.

There are 160 servers throughout the globe, 5TB of financial data stored, 1.3 million requests per minute for information, 320,000 bank feeds imported daily, $84B worth of invoices processed globally last year of which $34B related to NZ – this represents from NZ’s point of view about 20% of GDP.

What’s doing it for Xero clients is the single ledger concept. No longer is there data fragmentation of receiving a client’s backup, working out what version they are using, installing it, running off reports, analyzing those reports and then getting back to them. In today’s standards by the time this is all done, the data is probably 3 days old and the system the client uses will have had another 3 days of data entered, so we report on old data - not a good look!

Xero currently has 135,000+ customers and is aiming for 1 million. Even more impressive, is the money they have in the bank for future development which is in excess of $80 million. Another popular accounting software company has in excess of $600 million in debt – I wonder who the markets will deem to be the strongest!

From a user perspective consider the amount of people involved in the Xero ecosystem. There are:
• 4,500+ accountants
• 4,000+ banks
• 150+ developers
• 100+ trainers
• 200+ add-on products

There is no doubt Xero is the way of the future, so if you are not yet a user please feel free to give me a call to talk about how to become part of this excting future.